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Earlier this year an application was submitted to carry out the demolition of the dormant Brevik House and construct the hotel and associated parking after the development gained outline permission a couple of years ago.

A spokesperson for Breiwick Bay Properties Ltd said that as the idea of a hotel development has already been given permission in principle, “whether or not a hotel of this scale is acceptable”- or the previous approved plans for housing – is not something up for consideration.

A group of North mainland accommodation providers, however, has issued a formal objection against the latest application.

In a letter written through agent Hunter Planning, the group said the accommodation sector in Shetland is currently experiencing difficulties and uncertainties.

The company behind the Brevik plans have previously been in talks with national chains about the proposed hotel.

“Many of the existing accommodation providers in Shetland are small, family owned businesses which arguably provide the sector with more than their fair share of local character and distinctiveness,” the letter of objection continued.

“It is considered therefore that the proposed development has potential for detrimental material impacts on the character of the sector.

“Should this planning application be approved there will likely be further pressures on the economic viability of other accommodation providers in Shetland, in a climate which is already proving difficult for the sector”.

The group added that the alternative plans for housing would “serve a recognised demand”, while the proposal for a hotel “appears not to fulfil any readily identifiable demand”.

“The alternative proposal is considered to have significantly less impact on the economic viability of the accommodation sector in Shetland,” the letter said.

A local couple who run a guest house in Lerwick have also written to Shetland Islands Council planners with similar concerns.

Lerwick Community Council noted the application and said it was supportive of a development which could help tourism and employment.

Breiwick Bay Properties Ltd said in response to the latest objection: “The principle of a hotel development on this site has already been established through the granting of planning permission in principle in March 2017.

“The key matters up for consideration in terms of this application relate to the location of the building on the site and its design, not whether or not a hotel of this scale is acceptable.

“The council must determine the application it has before it at this time, irrespective of any previous proposals for alternative forms of development. We are very much looking forward to bringing this exciting project to Shetland.”

The developer had always maintained that the hotel plans could be resurrected as it explored building a residential site.

The team had looked into housing partly due to the downturn in the oil industry.

There a few other large scale housing developments planned in Lerwick, however, such as at Staney Hill and the old Anderson High School site.